Came back earlier this week after spending some time in Shanghai and Hangzhou over the last few weeks, my experiences:

• Used Mastercard Debit (N26) successfully a few times for larger payments; f.e. to buy silk in Hangzhou and to pay hotels (Hyatt and Holiday Inn), no problems at all at those locations. Interestingly enough the Holiday Inn overcharged me initially (they charged the standard price instead of the Booking.com Genius price), they came back with their POS machine to my room; promptly refunded the initial amount (credited immediately) and then charged the correct lower amount - very honest and flexible!
• For all other expenses I used the same Mastercard loaded into Alipay, no problems - but perhaps 3-4 times for random larger amounts (I guess the equivalent of 30 USD+) I received a 3-D Secure authentication prompt on my phone (as if I would do an online payment). I then had to verify the payment in my online banking app, once that was done the payment went through. Maybe the declined transactions of others are related to this; if your bank is blocked by the Chinese internet and you don't get the notification or can't login, you can't authorise the payment request. Using an European SIM card allowed my to use all normal apps (Instagram f.e. was fully working).
• In terms of fees, it looks like the 3% fees on purchases made through Alipay are waived (but you can see the amounts of the charges) for anything below ±25 USD, above that they are being charged - so when that is the case it's worth checking if a regular Visa or Mastercard is accepted.
• For transport in both Shanghai and Hangzhou I loaded the local metro/bus card (a QR code) within Alipay, you just have to change the city (and agree to some regulations) before you can use it. This also worked in offline mode for my partner. In Shanghai you can use the Shanghai Bus QR code for boats that are going from the Bund to Pudong.

Happy to answer any other questions on this topic as this thread helped me in preparation for my trip!